MAC2601 Exam Jun 2014 Paper & Solutions

QUESTION 1

QUESTION 1

Nyathi Bio-Electric (Pty) Ltd

Company’s contribution margin ratio for July 2019

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 100%
Contribution margin ratio = x
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠 1




Contribution margin ratio = Contribution/sales x 100%

For the month of July 2019:

Contribution margin = R205/R500 x 100%

= 41%

Workings:

(1) Calculation of variable selling and administration expenses through the high-low method



Overheads Units Produced
(Y) (X)
High August R70 000 750 units
Low July R50 000 500 units
Differences R20 000 250 units
Variable Cost per Unit = (R20 000/250 units) = R80

Based on Month of July Based on Month of August
y= a+bx y= a+bx
R50 000 = a +(R80 x 500) R70 000 = a +(R80 x 750)
R50 000 = a + R40 000 R70 000 = a + R60 000
a = R50 000 – R40 000 a = R70 000 – R60 000
a = R10 000 a = R10 000
Fixed cost are R10 000 Total fixed cost is R 10 000

Variable Costs (R80 x 500) = R40 000 Variable Costs (R80 x 750) = R60 000


(2) Calculation of contribution:

July
2019
Per Unit
R

, Sales 500
Less : Variable costs 295
Direct Materials 110
Direct Labour 75
Variable production overheads 30
Variable selling and administration 80
expenses
Contribution 205




1 (b)

(i) Calculation of Breakeven point in units for the month of July

𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
Breakeven point in units =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

𝑅70 000
= 𝑅205

= 341.46

= 342 units

𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
Breakeven point rand value =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜

𝑅70 000
= 41%

= R170 731.71

WORKINGS:

(1)

Calculation of total fixed costs :

Actual July 2 019
R
Fixed manufacturing overheads Fixed selling and administration 60 000
Other fixed costs 10 000
Total fixed costs 70 000


(ii)

𝑀𝑎𝑟𝑔𝑖𝑛 𝑜𝑓 𝑠𝑎𝑓𝑒𝑡𝑦 𝑢𝑛𝑖𝑡𝑠 100%
Margin of safety percentage = x
𝐴𝑐𝑡𝑢𝑎𝑙 𝑢𝑛𝑖𝑡𝑠 1